No protection for your Nectar points or airmiles

People spend a lifetime collecting loyalty points. But there's no protection if the scheme provider goes bust. And most travel insurance won't refund you if you book a holiday using points and something goes wrong.

Everybody loves getting something for nothing – and perhaps that’s the reason why loyalty cards and reward schemes are so popular in the UK. Around 19 million adults keep a Nectar card in their wallet, while it’s hard to get out of almost any restaurant or shop without the cashier trying to get you signed up to some kind of loyalty programme.

Recently, I was given the hard sell on a Holland & Barratt loyalty card – even though I only go there about twice a year. It was easier to sign up than to tell the cashier no. A quick check in my wallet reveals I’ve also got cards from Nandos, Starbucks, Pod, Leon, Caffe Nero, Marriot Hotels, Jet Airways, British Airways, United Airlines, Boots, Waitrose and my local craft beer store.

Some of these schemes are simple, good old fashioned loyalty programmes – which stamp a card for every purchase and give you something free once you’ve visited a handful of times. But others require you to give away your postal address, email address, phone number and date of birth before you’re up and running.

The value of your data

Together with your spending habits – which are digitally recorded on the card - it gives firms a powerful tool to better target their marketing. There’s a tangible value to this data for the firms who collect it – as it increases the response rate of their advertising campaigns and ultimately drives them better returns as a business.

But what do we, the customers, get in return? In fairness, many reward schemes offer decent ways to cash in the points you accrue – although some schemes make it quite difficult to work out how to get the best value. The value of a single air mile can vary dramatically depending on when and how you use it.

But perhaps the bigger problem is that there is no protection for customer rewards once they have been earned. The customer has done their part by giving up their data, but companies are free to wriggle out of their side of the bargain whenever they want to.

Ever shrinking rewards

Dilutions are all too common – such as the Airmiles scheme’s conversion to Avios. And in the worst cases, points evaporate altogether. A couple of years ago, for example, MBNA closed down the Lastminute.com credit card, giving customers just a few months to use or lose their points.

There also tends to be no protection for consumers if something goes wrong after you’ve booked part of your holiday using airmiles or some equivalent reward scheme. The exclusion in Aviva’s travel insurance policy is typical: “This policy won’t cover…any claim for…unused travel or accommodation arranged by using air miles, loyalty or points based ownership schemes, timeshares or similar promotions.”

Why on earth not? If customers have spent five years saving up their points, book their dream holiday – why should they not get their points back if they have to cancel or abandon their holiday at the last minute? There’s every chance that they’ve accrued those points by using the same company again and again – even when they might have got a cheaper deal elsewhere. Their reward points had a monetary value and should be covered by insurers.

Because of the relatively small nature of each reward, it’s natural for customers to spend many years accruing points before they finally come to cash them in. But in doing so, they take an enormous risk that by the time they want to use their points they will have been diluted in value – or become completely worthless.

It’s already reasonably common for companies to place expiry dates on their rewards. For example, if you have an Avios credit card, you may get an upgrade or companion voucher once you’ve spent enough on the card. But if you don’t use it within a year, you lose it.

The Canadian response

In Ontario, Canada – this became such a big issue recently, that the State eventually legislated to ban reward schemes from placing expiry dates on reward schemes. In that case, it was a couple of airlines that triggered public outrage when they tried to place an expiry on all airmiles that weren’t used within five years.

A few years before, Ontario also banned expiry dates on gift cards – another bug bear of mine that I’ve written about in this column before.

Back in Britain, there’s still no such protection.

I can appreciate that this may not be at the top of every legislator’s list of priorities. Brexit may be more pressing. But if we are to see a new Consumer Green Paper this year – as was promised by the last Government in the March Budget – then protection for points and rewards would be a good addition.

Companies get the benefit of customer’s loyalty immediately – and shouldn’t be able to wriggle out of their side of the bargain. Until the rules change, however, take care. Don’t hang onto your points for too long – or you could lose them.